US Treasury Yields Down After Disappointing Jobless Claims Data

Lebanon is witnessing its worse economic crisis with over 40% unemployment, 50% below poverty line and  $91B public debt. The government of Prime Minister Hassan Diab resigned last week  following the massive explosion at Beirut’s port that killed more than 170 people, with dozens still missing and 6,000 wounded. The new government, which must be fromed soon, must take quick and essential measures to restore the confidence of the international community and save the country’s economic and social conditions . Moreover, the situation is expected to worsen as the country will impose a two-week lockdown to contain a surge in coronavirus cases starting August 21, 2020.

Given the high level of uncertainty , the BLOM Bond Index (BBI), BLOMInvest Bank’s market value-weighted index which tracks the performance of the Lebanese government Eurobonds’ market (excluding coupon payments), dropped weekly by 1.05% to 15.14 points by August 20, 2020. In its turn, the JP Morgan EMBI retreated slightly  by a weekly 0.71% to 901.27 points this week.

In the US, the 5Y and 10Y treasury yields dropped weekly to reach 0.26% and 0.65%  respectively, compared to 0.32% and 0.71% last week. In fact, dispointed investors preferred to go for safe assets after the government’s latest report on the U.S. unemployment situation showed that the number of Americans filing for jobless benefits for the first time climbed back above 1M last week. Moreover, Geopolitical tensions remain on investors’ radar. Secretary of State Mike Pompeo on Wednesday warned Russia and China not to contravene the reimposition of UN sanctions on Iran. Worth mentioning that on Tuesday the S&P 500 (SPX) closed at an all-time high for the first time since the Covid-19 pandemic hit the United States. The market climbed higher on a combination of unprecedented fiscal and monetary stimulus in response to the pandemic, as well as hopes for a swift economic rebound.

As such, the 5Y and 10Y spread between the yield on Lebanese Eurobonds and their US comparables expanded from last week’s 6,068 and 4,629 bps, to 6,123 and 4,675 bps this week.

5 Year Credit Default Swaps, Mid-Prices (in basis points)

20/8/202013/08/2020
Lebanon N/A N/A
KSA8983
Dubai175179
Brazil232224
Turkey569554

 

Weekly Change of Lebanese Eurobonds Prices

 

 PricesWeeklyYieldsWeekly
Maturity Coupon in %20/08/202013/08/2020Change 20/08/202013/08/2020Change bps
10/4/20226.1017.1817.38-1.12%123.32%121.15%218
1/27/20236.0016.7116.461.50%109.35%109.70%-35
4/22/20246.6515.3815.81-2.77%81.90%80.04%186
11/4/20246.2515.8315.96-0.78%70.81%70.19%62
12/3/20247.0015.8315.96-0.78%72.70%72.09%60
2/26/20256.2015.8315.96-0.78%67.22%66.61%61
6/12/20256.2516.7116.96-1.47%61.91%61.13%78
11/28/20266.6015.8315.96-0.78%55.60%55.20%39
3/23/20276.8515.8715.810.36%55.20%55.23%-4
11/29/20276.7515.7515.96-1.30%52.36%51.80%56
11/3/20286.6515.6715.96-1.82%49.45%48.71%74
2/26/20306.6515.5015.63-0.80%47.45%47.08%37
4/22/20317.0015.4515.79-2.17%47.77%46.87%91
3/23/20327.0015.6716.08-2.59%46.50%45.41%109
11/2/20357.0515.7515.88-0.81%45.03%44.67%35
3/23/20377.2515.6316.33-4.33%46.47%44.50%197

 

Source: BLOMInvest Bank

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